CRIMINAL PENALTIES FOR MINIMUM WAGE VIOLATIONS

By now, employers are well-versed in the multitude of state and local minimum wage and sick leave ordinances enacted in recent years. However, one of the biggest unknowns was what enforcement and punishment would look like. Well, as 2017 has come to a close, we finally have some answers and the news is not positive for violators. There will be criminal penalties for minimum wage violations.

The City of Santa Monica has officially announced its first criminal conviction for minimum wage violations of the City’s new minimum wage laws, and it is patently clear they are not letting violators off easy. The first shoe fell on the JW Marriott LA Boutique Gift Shop, a hotel-based retail business.

The punishment for the Owner who failed to pay the City’s new minimum wage was handed down swiftly in the form of a plea agreement with the City Attorney. The penalties went far beyond an order to make payments for owed back wages, and include the following:

Placed on 36 months of probation;
Must perform 150 hours of community services;
Ordered to pay approximately $11,000 in back wages to all affected employees;
Ordered to pay approximately $3,000 in investigative costs to the City; and
Must comply with all applicable laws, including the City’s minimum wage laws.

The Los Angeles County Department of Consumer & Business Affairs has been contracted to act as the Wage Enforcement Division of the City of Santa Monica to investigate complaints, and, if appropriate, refer cases to the City Attorney for prosecution. The agency received numerous complaints from LA Boutique’s employees regarding violations of the wage ordinance and undertook an investigation spanning multiple months.

This conviction comes on the heels of the Los Angeles City Attorney’s Office announcing in June 2017 that they are demanding $1.45 million in penalties from Carl’s Jr. Restaurants in the City for failing to comply with the City’s minimum wage laws at several LA locations. This was yet another example of an investigation triggered by employee complaints. The City received complaints from employees and launched an investigation into the company’s financial records which revealed 37 employees were not paid the required minimum wage rate. The City demanded the company pay $910,010 in penalties to the affected employees, and an additional $541,423 in penalties and fines for failing to post required notices and failing to provide investigators reasonable access. Criminal penalties for minimum wage violations.

These cases should serve as a stark example of the severe consequences for violations of local minimum wage ordinances. There will be criminal penalties for minimum wage violations.

The next minimum wage increases in Los Angeles and Santa Monica are not due until July 1, 2018, as we detailed for you here (link). (Link) However, beginning January 1, 2018, employers in the City of Santa Monica must make required adjustments to their paid sick leave policies. As of January 1, 2018, businesses with 26 or more employees must increase their minimum paid sick leave allotment from 40 hours to 72 hours (through compliant front load or accrual methods), and businesses with 25 or fewer employees must increase from 32 hours to 40 hours.

Also, remember that the STATE minimum wage increased as of January 1, 2018. Large employers (26 or more employees) must now pay $11.00; smaller employers (with 25 or fewer employees) must pay $10.50. However, local minimum wages are even higher and must be followed if you are in a jurisdiction that has its own minimum wage regulation. Importantly, local changes are not necessarily on the same timetable as the state.

For example, in Santa Monica, the minimum wage is currently $15.66 for hotel based employees. That figure will increase on July 1 st by an amount to be announced by the City. For all other workers in Santa Monica, the current minimum wage varies based on the size of the employer. For employers with 26 or more employees, the Santa Monica minimum wage is $12.00. However, that figure will increase to $13.25 on July 1 st . For employers with 25 or fewer employees, the current Santa Monica minimum wage is $10.50. However, that figure will increase to $12.00 on July 1 st .

Since cities throughout the country are actively contemplating their own local minimum wage ordinances, it is important that you stay abreast of these developments.

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